As 2025 draws to a close, global markets are entering the new year with a level of confidence that has historically been rare. At YourDailyAnalysis, we view the latest Bank of America investor survey not as a simple reflection of market strength, but as a signal of where the investment cycle currently stands – one in which expectations of growth have become largely unquestioned.
The sentiment index, which combines cash allocations, equity exposure and expectations for global growth, rose to 7.4 out of 10, its highest reading in more than four years. In our assessment, such levels typically emerge not at the start of recoveries, but at points where downside scenarios have largely been removed from base-case forecasts. This reduces market resilience to unexpected shocks.
Portfolio positioning reinforces this interpretation. Combined exposure to equities and commodities has reached its highest level since early 2022, reflecting a broad conviction that global growth and supportive financial conditions will persist. At YourDailyAnalysis, we see this concentration in pro-cyclical assets as a sign that defensive buffers are thinning, increasing sensitivity to shifts in macroeconomic conditions.
Historical context further elevates the importance of these readings. Comparable levels of optimism have appeared only a handful of times over the past decades, including during the post-financial-crisis recovery and the post-pandemic surge. While those periods did not necessarily mark immediate market peaks, subsequent returns became more uneven and volatility increased.
Equity performance in 2025 has been both strong and consistent. The MSCI All-Country World Index gained around 20%, marking a third consecutive year of double-digit returns. We believe this extended rally, combined with declining interest rates, has pulled forward a portion of future returns, raising the bar for earnings growth and macro performance in 2026.
Consensus expectations for the year ahead remain constructive. Asset managers and major investment banks continue to forecast further equity gains, including double-digit upside for U.S. stocks. At YourDailyAnalysis, we note that such widespread agreement itself becomes a risk factor: when growth expectations are nearly universal, the scope for positive surprises narrows.
Macroeconomic assumptions underscore this confidence. A majority of survey participants expect a soft landing for the global economy, while expectations of a hard landing have fallen to multi-year lows. At the same time, cash allocations have dropped to historically low levels. We view this combination as a signal of high conviction, but also of limited preparedness for volatility.
Risks have not disappeared; they have shifted. Concerns over stretched valuations in the technology sector and a potential artificial intelligence bubble remain the dominant tail risk, even as anxiety around capital spending has eased. In our view, declining attention to these risks reflects normalization rather than genuine risk reduction, leaving markets exposed to disappointment should monetization fall short.
Our base-case outlook at Your Daily Analysis for early 2026 is continued market appreciation, but at a slower pace and with heightened sensitivity to macro data and earnings outcomes. We do not anticipate an abrupt reversal, yet we see an increased likelihood of more frequent corrections and rising volatility.
At YourDailyAnalysis, we interpret the current level of optimism as a cue to reassess risk balance rather than to exit markets. The priority for investors is flexibility: gradually rebuilding liquidity buffers, diversifying away from crowded segments, and preparing for scenarios in which the much-anticipated soft landing proves less smooth than the market currently assumes.
